Reference no: EM132608731

On March 31, 2021 Holland Industries purchased assets for $2,500,000 cash. Before completing the purchase, Holland had an appraisal completed to determine the relative value of each of the assets included in the purchase price.

• The appraisal indicated that the fair value of the land, if purchased separately, would be $375,000, the building's value is $1,900,000, the manufacturing equipment $192,500, and the office and computer equipment $55,000. In addition to the land, building and equipment, the purchase price includes inventory with a net realizable value of $27,500.
• The anticipated life of the building is 25 years, the manufacturing equipment 10 years, and the office and computer equipment 5 years, with no residual value for any of them. Holland has a December 31 year end.

Instructions

Question a) Record the purchase on March 31, 2021.

Question b) Record the depreciation expense for 2021 using the straight-line method assuming the company chooses to prorate depreciation based on the number of months the asset has been in use.